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August 24, 2005

US banks form electronic trading marketplace

The Boston Stock Exchange is working with Citigroup, Credit Suisse First Boston, Fidelity Brokerage Company and Lehman Brothers to launch an electronic equities trading market next year.

By CBR Staff Writer

Financial terms of the deal were not disclosed, but reports have suggested a maximum total value of $55 million, with each of the four banks investing around $20 million in the venture, called the Boston Equities Exchange (BEX), for a stake of 36%. The Boston Stock Exchange (BSE) is expected to take the rest.

The new exchange will use technology from Atos Euronext Market Solutions and Lava Trading.

This partnership brings together a unique combination of industry expertise and sophisticated technology that will provide our clients with automated tools and a cost structure that will enable us to meet the needs of retail and institutional investors, while managing financial and regulatory risk, said Mike Curran, CEO of the BSE.

The BEX services will be deployed over the next 12 to 15 months, with the first phase expected to be complete in early 2006.

The move comes a week after four Wall Street firms, including Credit Suisse First Boston (CSFB), Citigroup, Morgan Stanley and UBS, agreed to pay a total of $19 million for a 25% share of the Philadelphia Stock Exchange.

The BSE says the deal represents part of a multi-year plan to diversify its business. In February last year, it helped to launch the Boston Options Exchange (BOX), an electronic market allowing brokers to trade directly with their own customers.

Some industry observers see the move as the BSE’s attempt to enter the increasingly popular electronic trading market that is shaping the future of stock markets. New rules by the Securities and Exchange Commission have led to big mergers and acquisitions as companies strive to compete in this new technology-focused era.

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Earlier this year BSE’s main rival the New York Stock Exchange (NYSE) bought electronic exchange Archipelago Holdings, while the Nasdaq Stock Market acquired Reuter’s Instinet subsidiary.

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